Companies typically use an Employer of Record for fast entry, payroll management once an Austrian entity exists, and entity setup for firms building a durable DACH-region presence. Austria's Abfertigung Neu (new severance) system and its mandatory extra salary payments are the features most likely to require careful planning.

Employer of Record in Austria

An EOR allows a company to hire in Austria without registering with the Austrian Health Insurance Fund (ÖGK) or managing the mandatory 13th and 14th salary payments and the Abfertigung Neu severance fund contributions. It suits companies making early hires, testing the Austrian or DACH market, or hiring specialist talent before a longer-term entity decision. It is less suited to companies with an existing Austrian entity or planning larger, long-term teams.

How payroll works in Austria

Austrian payroll withholds income tax (Lohnsteuer) at progressive rates and requires both employer and employee contributions to the social security system (Sozialversicherung), covering health, pension, accident, and unemployment insurance. Payroll is structured around 14 payments per year: 12 monthly salaries plus a mandatory holiday bonus (Urlaubsgeld) and a mandatory Christmas bonus (Weihnachtsremuneration), each equivalent to one month's salary, paid in June and November respectively. Employers also contribute to the Abfertigung Neu severance fund (BV-Kasse) at 1.53 percent of gross salary from the first month of employment.

Payroll frequency and reporting obligations

Monthly payroll is standard, with Lohnsteuer and Sozialversicherung contributions remitted monthly. The holiday and Christmas bonuses are paid in June and November under the standard collective agreement schedule, though the exact timing can vary by sector collective agreement. Abfertigung Neu contributions are remitted monthly to the employee's chosen BV-Kasse. Annual tax reporting includes issuing employees with a Lohnzettel (wage statement) for their own annual filing. Employers must register with ÖGK before the first employee starts work.

Key payroll nuances

The 14-payment salary structure (12 monthly salaries plus holiday and Christmas bonuses) is a firm statutory and collective agreement requirement and must be budgeted as certain annual cost — effectively, employees receive 14 months' salary per year. The Abfertigung Neu system is Austria's modern severance model: instead of a large lump-sum liability accruing to the employer on termination, the employer contributes 1.53 percent of gross salary monthly to a portable employee fund (BV-Kasse) from day one, and the employee takes this fund with them on leaving regardless of the reason for separation. This makes Austrian severance more predictable than the old system and eliminates the large termination-triggered liability common in other markets.

Pay components and employer costs

Typical pay components include base salary, the holiday bonus, and the Christmas bonus. Employer Sozialversicherung contributions typically add around 21 percent on top of gross salary, and the Abfertigung Neu contribution adds a further 1.53 percent. When the two extra monthly payments are factored in, total employer cost is materially above a simple twelve-times-salary calculation — effectively closer to 14 months of salary plus the social security and severance fund load.

Benefits and leave entitlements

Statutory annual leave is five weeks (25 working days) after six months of service, rising to six weeks after 25 years of service — a generous minimum by European standards. Sick leave is employer-funded for an initial period, then covered by the health insurance fund. Maternity leave (Mutterschutz) is eight weeks before and eight weeks after birth, followed by an extended parental leave (Karenz) option of up to two years. Public holidays number 13 nationally. The Sozialversicherung system provides Austria's core healthcare, pension, and accident insurance coverage.

Hiring and employment contracts

Written contracts are standard practice and required for certain contract types. Probation periods are capped at one month under most collective agreements, a notably short window compared to many European peers. Fixed-term contracts are permitted but must have a genuine reason and are capped in duration and renewal count. Termination of indefinite-term employees requires notice periods that vary by tenure and role level, and must follow the applicable collective agreement's specific rules. The Abfertigung Neu system means there is no large severance liability on termination — the fund belongs to the employee regardless of how the employment ends.

Entity setup in Austria

The Gesellschaft mit beschränkter Haftung (GmbH) is the standard vehicle for foreign employers, with a minimum share capital of €35,000 (of which at least half must be paid in on incorporation). Registration is completed through the commercial court (Firmenbuch), followed by ÖGK registration and, if applicable, sector collective agreement identification before hiring. End-to-end setup typically takes four to six weeks.

EOR vs Payroll Management vs Entity Setup — Austria

Frequently asked questions